Fertilizer Prices Are Soaring — Here’s A Way To Profit…

Jamie Dimon is concerned.

And when the CEO of JPMorgan Chase, the largest U.S. bank by assets, is concerned, it pays to listen. The man knows a thing or two about the macro picture of the American economy.

Speaking at a financial conference last week in New York, Dimon said he is bracing for an economic “hurricane”.

One reason is Quantitative tightening or QT. The Federal Reserve is set to begin trimming its balance sheet this month, reducing its bond holdings to combat sky-high inflation. For context, the Fed began purchasing long-term government bonds and mortgage-backed securities to soften the blow of the Covid-19 pandemic.

The other reason Dimon cited is the war in Ukraine. Specifically, the impact it will have on commodities, primarily food and fuel. As CNBC reports:

“Wars go bad, [they] go south in unintended consequences,” Dimon said. “We’re not taking the proper actions to protect Europe from what’s going to happen to oil in the short run.”

Dimon predicted oil could hit $150 or $175 a barrel, something I’m sure drivers won’t be pleased to hear. But while his comments about oil got most of the attention in the press, it’s worth noting that he mentioned other commodities, and food as well.

Fertilizer Prices Are Getting Out Of Hand…

As I’ve pointed out before, Ukraine and Russia are both breadbaskets to the world, accounting for a substantial portion of the global wheat output. That goes for fertilizer, too — which is one (of several) reasons why prices are skyrocketing.

Source: World Bank

The World Bank recently reported that fertilizer prices have risen nearly 30% in 2022 alone. And that comes after an 80% hike in 2021.

Like many things seeing price increases or supply disruptions these days, the reasons are amplified by the conflict in Ukraine… Supply chain disruptions, surging import costs, sanctions on Russia (the #1 exporter of nitrogen and #2 for phosphorus and potassium), high natural gas prices (a key input for fertilizer), extreme weather events… you name it.

Add it all up, and despite higher crop prices, fertilizers are now at their least affordable levels since the 2008 global food crisis, according to World Bank.

One Way To Profit…

That’s one reason why my colleague Jimmy Butts recently told his premium readers about The Mosaic Company (NYSE: MOS).

MOS is one of the world’s top producers of phosphate and potash — two of the three most important nutrients in agriculture (nitrogen is the third).

The company accounts for 73% and 40% of North America’s phosphate and potash annual production. Last year was a banner year for the company, generating $12.4 billion in sales, a 42.3% increase over 2020. Net income also soared 145% to over $1.6 billion.

That growth is expected to continue this year, but the stock became overstretched in April, topping out around $77.50 before retreating back to the mid-$50s…

Closing Thoughts

Just about every commodity is surging these days – from oil and natural gas to wheat and fertilizer. MOS has benefitted from this rise immensely. That said elevated fertilizer prices may be already priced in. And any news of easing conflict in Ukraine could dramatically affect the stock.

That said, higher prices and strong demand for fertilizer are likely to continue for some time. So if you’re looking for a quick rebound trade, MOS might worth considering here.

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